HK sees cost control as the key to its competitive edge
In a fight to retain a competitive edge over neighbouring ports, the Hong Kong government has introduced policies to control costs and make the logistics process more efficient.
While the effectiveness of such measures remains to be seen, the government has poured tens of millions of dollars into the effort, including a $31.5 million equity investment into the company building the electronic platform for the trade.
'Hong Kong has been facing competition from our neighbouring area in terms of logistics service and we have been trying to enhance the competitiveness of the port, in consultation with the industry,' said Janice Tse Siu-wa, deputy secretary of economic development, who oversees port, maritime and logistics.
'I think the challenge is for Hong Kong to enhance its efficiency and cost effectiveness in the face of competition. Our cost structure is definitely higher than across the border because of labour and land costs.'
The competition is certainly catching up. The amount of cargo handled by Shenzhen port grew an average of 32.5 per cent a year from 2000 to 2005, compared with a growth of 4.5 per cent at Hong Kong, according to the Hong Kong Economic Development and Labour Bureau.
But the Hong Kong port still handles a larger volume than Shenzhen, with 22.6 million teu (20-foot equivalent units) of cargo passing through last year, against 16 million teu at Shenzhen.
Cost probably is a key reason for the rapid growth at Shenzhen. According to the Hong Kong-government commissioned study on the trade in 2004, it costs $2,340 more for a container from Dongguan going to the United States to be routed via Hong Kong than Shenzhen. The higher cost comes mostly from haulage costs and terminal handling charges.
That same study found that a competitive edge Hong Kong had was in handling containers by river barge, to be transferred on to larger ocean-bound vessels.
Cities on the mainland that could especially benefit from this route are those in the western part of the Pearl River Delta such as Zhongshan. The roads in some of these places are less developed, meaning it would cost more to transport the goods by road to a mainland port than by river to Hong Kong, the study found.
But by its own admission, the Hong Kong Economic Development and Labour Bureau said in a recent document that these transshipments would not bring as much economic benefits as direct shipments.
Still, the government is moving towards providing more land for backup use at Container Terminal No 9 in Kwai Chung. A tender had been awarded for two barging sites near the terminal, Ms Tse said.
The government also will cut the cost for river trade vessels coming into the port.
